FEES 4 Annex 11A 2 4Definition of annual income for the purposes of calculating fees in fee blocks A.13, A.14, A.18, A.19 and B. Service Companies, Recognised Investment Exchanges and Regulated Benchmark Administrators

R01/10/2018

Annual income definition2 2
General definition for all relevant fee-blocks (other than where the firms is an operator of a Recognised Investment Exchange or a Benchmark Administrator)6 "Annual income" for a particular fee block (the “relevant fee block”) is the gross inflow of economic benefits (i.e. cash, receivables and other assets) recognised in the firm's accounts during the reporting year2 in respect of, or in relation to, the provision in the UK of the regulated activities specified in FEES 4 Annex 1A R Part 115 as belonging to the relevant fee block 2. The figure should be reported for the relevant fee block without netting off the operating costs or business expenses, but including: (a) all brokerages, commissions, fees, and other related income (for example, administration charges, overriders, profit shares etc) due to the firm in respect of, or in relation to, the provision in the UK of the regulated activities specified in FEES 4 Annex 1A R Part 115 as belonging to the relevant fee block 2and which the firm has not rebated to clients or passed on to other authorised firms 15 (for example, where there is a commission chain). PLUS:2 (b) any ongoing commission from previous business received by the firm during the reporting year. PLUS:2 (c) the “fair value” of any goods or services the firm provided to clients. This is the commission equivalent or 2an estimate of the amount the firm would otherwise have received for any regulated activity under (a) above, but for which it has made a business decision to waive or discount its charges2. Definition for Recognised Investment Exchanges6 “Annual income” for a recognised investment exchange is the gross inflow of economic benefits (i.e. cash, receivables and other assets) recognised in the firm’s accounts during the reporting year in respect of, or in relation to activities that comprise a necessary part of an exchange’s business as an investment exchange.6 This should include all revenues the firm derives from operating multilateral trading facilities and organised trading facilities.9 For the purposes of calculating annual income of the recognised investment exchange include amounts received in relation to the operation of its markets; access to those markets; the submission, management and execution of orders; quotes or transactions on those markets; the supply of pre-and post- trade transparency information about those markets; fees for admission to trading or listing; membership of connectivity charges; fees for order execution or management; trade reporting; market data and any other relevant revenue streams.6 Where the firm is a Regulated8 Benchmark Administrator6 “Annual income” for a regulated benchmark administrator 8 is the gross inflow of economic benefits (i.e. cash, receivables and other assets) recognised in the firm’s accounts during the reporting year in respect of, or in relation to activities in the UK 9 that comprise a necessary part of its business as a regulated benchmark administrator 8. Where the sales and marketing of a benchmark are undertaken by a separate legal entity, the regulated benchmark administrator 8 is responsible for identifying the relevant income and reporting it to us as its own income. To avoid double counting, the regulated benchmark administrator 8 should report only the income from sales in the UK 9 and exclude any amount paid to it from that income to pay for its expenses as a regulated benchmark administrator 8. Where the firm’s regulated activities are carried on by an appointed representative of the firm5 The firm's annual income must include income received by an appointed representative carrying a regulated activity in a relevant fee block on behalf of the firm. 5 The appointed representative's annual income must be calculated in the same way as the firm's. However, to avoid double counting, the appointed representative's annual income must not include any income also recognised in the firm’s accounts, including income recognised as a result of a commission sharing arrangement with the appointed representative. Where the relevant fee-block is fee-block A.182 For the purposes of calculating annual income for fee-block A.18, also include the following:2 (d) for any home finance mediation activity carried out by the firm for which it receives payment from the lender or provider on a basis other than that in (a), the value of all new mortgage advances and amounts provided under other home finance transactions resulting from that activity multiplied by 0.004;2 PLUS:2 (e) if the firm is a home finance provider, the value of all new mortgage advances and amounts provided under other home finance transactions which are regulated mortgage contracts, home purchase plans, home reversion plans or regulated sale and rent back mediation activity, multiplied by 0.004m, excluding mortgage advances and home finance transactions which result from home finance mediation activity carried on by another firm, where payment has been made by the home finance provider to that other firm under (a);2 PLUS: 2 (f) for firms whose permission includes administering regulated mortgage contracts, but not entering into a regulated mortgage contract and firms whose permission includes administering a home finance transaction but not entering into a home finance transaction, and in either case whose permission does not include advising on a home finance transaction, the relevant amounts are multiplied by 0.15. 2 2 Where the relevant fee-block is fee-block A.192 For the purposes of calculating annual income for fee-block A.19, also include the following:2 (g) in relation to any activities in (a), for any insurance distribution activity 7 carried out by the firm for which it receives payment from the insurer on a basis other than that in (a), the amount of premiums receivable on its contracts of insurance multiplied by 0.07;2 PLUS: 2 (h) if the firm is an insurer in relation to the activities in (a), the amount of premiums receivable on its contracts of insurance multiplied by 0.07,3excluding those contracts of insurance which:2 - result from insurance distribution activity 7 by another firm, where payment has been made by the insurer to the firm under (a); or2 - are not general insurance contracts or pure protection contracts.2 AND2 (i) for the purposes of calculating annual income for fee-block A.19:2 - the provision in the UK of the regulated activities specified in FEES 4 Annex 1A Part 1 as belonging to the relevant fee block includes the provision of activities that would have been insurance distribution activity 7 in relation to general insurance contracts or pure protection contracts if they had been carried on after 13 January 2005 or, in relation to connected travel insurance contracts, from 1 January 2009; 2- a reference to a "firm " includes a reference to any person, including a connected travel insurance intermediary, who carried on activities which would be insurance distribution activity 7 (in respect of general insurance contracts or pure protection contracts) if they had been carried on after 13 January 2005 or, in relation to connected travel insurance contracts, from 1 January 2009.2Guidance on the interpretation of this definition is presented in FEES 4 Annex 13 G.2 2 15 2 2 15 2 15 2 2 2 2 6 6 3

Annual income definition2

General definition for all relevant fee-blocks (other than where the firms is an operator of a Recognised Investment Exchange or a Benchmark Administrator)6

"Annual income" for a particular fee block (the “relevant fee block”) is the gross inflow of economic benefits (i.e. cash, receivables and other assets) recognised in the firm's accounts during the reporting year2 in respect of, or in relation to, the provision in the UK of the regulated activities specified in FEES 4 Annex 1A R Part 115 as belonging to the relevant fee block 2.

The figure should be reported for the relevant fee block without netting off the operating costs or business expenses, but including:

(a) all brokerages, commissions, fees, and other related income (for example, administration charges, overriders, profit shares etc) due to the firm in respect of, or in relation to, the provision in the UK of the regulated activities specified in FEES 4 Annex 1A R Part 115 as belonging to the relevant fee block 2and which the firm has not rebated to clients or passed on to other authorised firms 15 (for example, where there is a commission chain).

PLUS:2

(b) any ongoing commission from previous business received by the firm during the reporting year.

PLUS:2

(c) the “fair value” of any goods or services the firm provided to clients. This is the commission equivalent or 2an estimate of the amount the firm would otherwise have received for any regulated activity under (a) above, but for which it has made a business decision to waive or discount its charges2.

Definition for Recognised Investment Exchanges6

“Annual income” for a recognised investment exchange is the gross inflow of economic benefits (i.e. cash, receivables and other assets) recognised in the firm’s accounts during the reporting year in respect of, or in relation to activities that comprise a necessary part of an exchange’s business as an investment exchange.6 This should include all revenues the firm derives from operating multilateral trading facilities and organised trading facilities.9

For the purposes of calculating annual income of the recognised investment exchange include amounts received in relation to the operation of its markets; access to those markets; the submission, management and execution of orders; quotes or transactions on those markets; the supply of pre-and post- trade transparency information about those markets; fees for admission to trading or listing; membership of connectivity charges; fees for order execution or management; trade reporting; market data and any other relevant revenue streams.6

Where the firm is a Regulated8 Benchmark Administrator6

“Annual income” for a regulated benchmark administrator 8 is the gross inflow of economic benefits (i.e. cash, receivables and other assets) recognised in the firm’s accounts during the reporting year in respect of, or in relation to activities in the UK 9 that comprise a necessary part of its business as a regulated benchmark administrator 8.

Where the sales and marketing of a benchmark are undertaken by a separate legal entity, the regulated benchmark administrator 8 is responsible for identifying the relevant income and reporting it to us as its own income. To avoid double counting, the regulated benchmark administrator 8 should report only the income from sales in the UK 9 and exclude any amount paid to it from that income to pay for its expenses as a regulated benchmark administrator 8.

Where the firm’s regulated activities are carried on by an appointed representative of the firm5

The firm's annual income must include income received by an appointed representative carrying a regulated activity in a relevant fee block on behalf of the firm. 5

The appointed representative's annual income must be calculated in the same way as the firm's. However, to avoid double counting, the appointed representative's annual income must not include any income also recognised in the firm’s accounts, including income recognised as a result of a commission sharing arrangement with the appointed representative.

Where the relevant fee-block is fee-block A.182

For the purposes of calculating annual income for fee-block A.18, also include the following:2

(d) for any home finance mediation activity carried out by the firm for which it receives payment from the lender or provider on a basis other than that in (a), the value of all new mortgage advances and amounts provided under other home finance transactions resulting from that activity multiplied by 0.004;2

PLUS:2

(e) if the firm is a home finance provider, the value of all new mortgage advances and amounts provided under other home finance transactions which are regulated mortgage contracts, home purchase plans, home reversion plans or regulated sale and rent back mediation activity, multiplied by 0.004m, excluding mortgage advances and home finance transactions which result from home finance mediation activity carried on by another firm, where payment has been made by the home finance provider to that other firm under (a);2

PLUS: 2

(f) for firms whose permission includes administering regulated mortgage contracts, but not entering into a regulated mortgage contract and firms whose permission includes administering a home finance transaction but not entering into a home finance transaction, and in either case whose permission does not include advising on a home finance transaction, the relevant amounts are multiplied by 0.15. 2

Where the relevant fee-block is fee-block A.192

For the purposes of calculating annual income for fee-block A.19, also include the following:2

(g) in relation to any activities in (a), for any insurance distribution activity 7 carried out by the firm for which it receives payment from the insurer on a basis other than that in (a), the amount of premiums receivable on its contracts of insurance multiplied by 0.07;2

PLUS: 2

(h) if the firm is an insurer in relation to the activities in (a), the amount of premiums receivable on its contracts of insurance multiplied by 0.07,3excluding those contracts of insurance which:2

- result from insurance distribution activity 7 by another firm, where payment has been made by the insurer to the firm under (a); or2

- are not general insurance contracts or pure protection contracts.2

AND2

(i) for the purposes of calculating annual income for fee-block A.19:2

- the provision in the UK of the regulated activities specified in FEES 4 Annex 1A Part 1 as belonging to the relevant fee block includes the provision of activities that would have been insurance distribution activity 7 in relation to general insurance contracts or pure protection contracts if they had been carried on after 13 January 2005 or, in relation to connected travel insurance contracts, from 1 January 2009; 2- a reference to a "firm " includes a reference to any person, including a connected travel insurance intermediary, who carried on activities which would be insurance distribution activity 7 (in respect of general insurance contracts or pure protection contracts) if they had been carried on after 13 January 2005 or, in relation to connected travel insurance contracts, from 1 January 2009.2Guidance on the interpretation of this definition is presented in FEES 4 Annex 13 G.2

2 15 2 2 15 2 15 2 2 2 2 6 6 3

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FEES 4 Annex 11A 2 4Definition of annual income for the purposes of calculating fees in fee blocks A.13, A.14, A.18, A.19 and B. Service Companies, Recognised Investment Exchanges and Regulated Benchmark Administrators